Computer Associates 2012 Annual Report Download - page 28

Fluctuations in foreign currencies could result in translation losses.
Our consolidated financial results are reported in U.S. dollars. Most of the revenue and expenses of our foreign subsidiaries are
denominated in local currencies. Given that cash is typically received over an extended period of time for many of our license
agreements and given that a substantial portion of our revenue is generated outside of the U.S., fluctuations in foreign currency
exchange rates (such as the euro) against the U.S. dollar could result in substantial changes in reported revenues and operating results
due to the foreign currency impact upon translation of these transactions into U.S. dollars.
In the normal course of business, we employ various strategies to manage these risks, including the use of derivative instruments.
These strategies may not be effective in protecting us against the effects of fluctuations from movements in foreign exchange rates.
Fluctuations of the foreign currency exchange rates could materially adversely affect our business, financial condition, operating
results and cash flow.
Failure by us to effectively execute on our announced workforce reductions could result in total costs that are
greater than expected or revenues that are less than anticipated.
We have previously announced workforce reductions and other cost reduction initiatives to reallocate resources to growth areas of
our business as part of our strategy. We may have further workforce reductions in the future. Risks associated with these actions and
other workforce management issues include delays in implementation, changes in plans that increase or decrease the number of
employees affected, adverse effects on employee morale and the failure to meet operational targets due to the loss of employees, any
of which may impair our ability to achieve anticipated cost reductions or may otherwise harm our business, which could materially
adversely affect our financial condition, operating results and cash flow.
We have outsourced various functions to third parties and use third parties as vendors pursuant to
arrangements that may not be successful or fully secure, thereby resulting in increased costs or an increased
chance of a cybersecurity threat, which may adversely affect service levels and our public reporting.
We have outsourced various functions to third parties, including certain development and administrative functions and hosting for our
SaaS business, and may outsource additional functions to third-party providers in the future. We use third party vendors for a variety
of functions including a number of which expressly involve confidential and/or personally identifiable information. We rely on all of
these third parties to provide services on a timely and effective basis and to adequately address their own cybersecurity threats.
Although we periodically monitor the performance of these third parties and maintain contingency plans in case the third parties are
unable to perform as agreed, we do not ultimately control the performance of our outsourcing partners. The failure of third-party
outsourcing partners or vendors to perform as expected or as contractually required could result in significant disruptions and costs to
our operations or our customers’ operations, including the potential loss of personally identifiable data of our customers, employees
and business partners and could subject us to legal action by government authorities or private parties, which could materially
adversely affect our business, financial condition, operating results and cash flow, and our ability to file our financial statements with
the SEC timely or accurately.
We may encounter events or circumstances that would require us to record an impairment charge relating to our
goodwill asset balance.
Under GAAP, we are required to evaluate goodwill for impairment at least annually, and more frequently if impairment indicators are
present. Prior to fiscal 2012, we evaluated goodwill impairment based on a single operating segment. In the first quarter of fiscal
2012, we disaggregated our operations into three operating segments. This change required the allocation of our goodwill across these
operating segments, as well as a change in our evaluation approach with respect to each of these operating segments. We completed
our analysis for allocating goodwill by operating segment during the fourth quarter of fiscal 2012. Going forward, absent any
indicators of impairment, we expect to perform an annual impairment analysis during the fourth quarter of each fiscal year.
In future periods, we may be subject to factors that may constitute a change in circumstances, indicating that the full carrying value of
our goodwill may not be recoverable. These changes may consist of, but are not limited to, declines in our stock price and market
capitalization, reduced future cash flow estimates, and slower growth rates in our industry. Any of these factors, or others, could
require us to record a significant non-cash impairment charge in our financial statements during a period. If we determine that a
significant impairment of our goodwill has occurred in any of our operating segments, this could materially adversely affect our
business, financial condition and operating results.
Potential tax liabilities may materially adversely affect our results.
We are subject to income taxes in the United States and in numerous foreign jurisdictions. Significant judgment is required in
determining our worldwide provision for income taxes. In the ordinary course of our business, we engage in many transactions and
calculations where the ultimate tax determination is uncertain.
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